Instead of pushing up lending, commercial banks have spent money to buy government bonds, accepting the low government bond interest rates.

Though the lending interest rates have been lowered to 15 percent per annum, and though banks really want to push up lending to “liberalize” their excessive capital, the outstanding loan growth rate remains modest.

Late last week, 7 trillion dong worth of government bonds was successfully sold at the Hanoi Stock Exchange. Three trillion dong worth of 3-year bonds had the interest rate of 9.15 percent per annum, another 3 trillion dong worth of 5-year bonds were sold at the interest rate of 9.45 percent per annum, and the 1 trillion dong worth of 2-year bonds were sold at 8.95 percent.

The interest rates all were lower by 0.25 percent, 1.03 percent and 1.4 percent, respectively, than the rates of the last bidding.

Especially, the interest rates are even lower than the interest rates banks have to pay to depositors when mobilizing capital from the public. Many banks have announced the ceiling lending interest rate of 15 percent per annum, but the rates are only applied to some subjects.

For example, from May 10 to July 9, 2012, import-export companies can access the dong preferential capital at the interest rate of 14 percent per annum, and dollar capital at 4 percent per annum at Lien Viet Post Bank.

Meanwhile, Agribank has adjusted its short term loan interest rates, which are calculated by the dong deposit interest rates (1 month and longer terms) plus 3 percent at maximum applied to the agriculture and rural development sector, and to small and medium enterprises.

The problem now is that banks accept to buy government bonds, despite the low interest rates which bring loss, instead of pushing up lending, despite the higher interest rates.

Analysts say banks would rather seek lower profit by buying bonds than expanding credit because of the fear for risks. Banks would only pump money to save the businesses which are meeting temporary difficulties, while they would not give money just to extend the enterprises’ life by some more months.

Banks have also tightened the requirements on borrowers, which means that fewer enterprises would enjoy the preferential loans.

Meanwhile, Nguyen Hong Long, a senior executive of Techcombank, said that if banks consider bonds as long term investment deals, not short term investment deals like deposits; one could not say banks would take loss with the investments in the bonds.

The current bond interest rate is 11 percent, but if the rate of interests drops to 8 percent, this means that banks would make a profit of 3 percent. On the interbank market, transactions are made with the interest rates of 3-4 percent per annum only. Therefore, if having capital in excess, banks still have to buy bonds.

The fact that banks pour money into bonds shows that banks have capital in excess. Banks have not expanded credit not because they do not want to lend to businesses, but because there are very few clients who can satisfy the requirements set by the banks to be eligible for borrowing money.

An analyst has said the current good liquidity situation is just temporary, since the State Bank has pushed up the purchase of foreign currencies to increase the foreign currency reserves, for which it has pumped dong into circulation.

Phan Hong Hai, Deputy General Director of HSBC Vietnam, also said that the capital has got stuck because of the low demand for loans in the context of the economic difficulties; therefore, banks have to put their idle capital into bonds.